Town Proposes Using Free Cash Twice to Pay for Belmont Center Project

Town Meeting members will be asked next month to dip twice into the town’s “savings” account to pay for the long-awaited facelift of Belmont Center’s traffic and parking design.

Under a proposal derived by town officials and Belmont’s Treasurer Floyd Carman who presented the plan to the Belmont Board of Selectmen Wednesday, Oct. 29, the now $2.8 million construction project set to reshape the roadways and parking in and around Belmont Center will be paid for using the town’s “free cash” as both a downpayment and then dipping into the account over 15 years to pay for the remaining debt, said David Kale, Belmont’s town administrator.

Free cash is unspent money remaining at the end of the fiscal year including from budget line-items and any greater than expected tax or fee receipts.

If approved by a majority of members of the Special Town Meeting on Nov. 17, $1.3 million will be taken from free cash as a one-time lump sum payment. The remaining $1,475,000 will be raised by selling 15-year bonds,

But rather then ask voters to approve a debt exclusion as has happened in the past with large capital expenditures, Belmont will take the unprecedented step of using free cash make the bond repayment over the life of the bond.

While the state’s Department of Revenue has not certified the amount Belmont has for free cash, Carman said free cash came in at $6.2 million in fiscal 2015.

Carman said the town will take approximately $169,000 from the free cash account in fiscal 2017 to pay both the interest and principal of the note. The payments will then decrease in subsequent years until there is a final payment of just under $100,000 in fiscal 2032.

Andy Rojas, Selectmen chair, told members of the Warrant and Capital Budget committees that the town hopes to have the project out to bid in January and have work completed by October. He also said the Special Town Meeting will only take up the project’s expenditure plan, “we are not opening up the project’s design for discussion.”

“[Town Meeting] is about funding, not to discuss every crosswalk or bump out,” Rojas reiterated.

While Kale is known for reminding residents, town officials and Town Meeting members that “free cash is not free” – any reduction in the account must be restored in the next year’s budget – both he and Carman believe free cash is strong enough position to sustain payments over the next decade and a half.

“We’re looking at a healthy free cash and the opportunity is there to utilize the low-interest rates,” said Carman.

Saying that he has heard some residents being critical of the town not utilizing the millions in the account, Carman told the Belmontonian “here’s an opportunity to use the savings constructively.”

Using the town’s savings account will also lessen the burden on the town’s debt service now hovering just over $5.1 million in fiscal 2015.
“Rather than burden taxpayers of 2015 to pay for this debt, we are spreading out the obligation to residents over the 15 years of the bond,” said Carman.

Carman also noted the town in the next few years will likely be asked to fund a new Belmont High School for between $60 to $100 million.

“We don’t want to add anymore debt to the books with that looming,” he said.

Paying the interest and principal of the $1,450,000 (the actual amount could be less once the engineering blueprints are completed, said Rojas) would be the second specific expense that will be paid by free cash. Last year, Town Meeting approved spending approximately $240,000 annually in other post-employment benefits, or OPEB, payments to a nearly $180 million unfunded obligation.

In recent years, the town has transferred approximately $2 million from free cash at the beginning of the budget cycle to pay for town and school expenses, filling a shortfall in local aid from the state legislature.

The town will also create a Capital Project Debt Stabilization Fund to pay down existing obligations.

The new stabilization account – to be approved by Town Meeting – will be funded with one-time payments to the town. Kale said this would include the sale of town-owned property such as the long-awaited purchase for $850,000 of the municipal parking lot at Cushing Square as part of the delayed Cushing Village project and the increasingly doubtful Woodfall Road luxury housing development.

Which of the current debt obligations could be reduced by the stabilization fund “will be part of a group discussion,” said Rojas.

When asked why this project is being given priority over six large capital projects – including a new police station and refurbishing the Viglirolo Skating rink – Rojas said the others have not begun the detailed process of design and planning.

“Why we are doing this is because it’s ready,” said Rojas, adding the reconstruction will increase business and economic development to the business center of town.